The Tamil Nadu Electricity Regulatory Commission (TNERC), in a recent order, approved the tariff of ₹2.61 (~$0,036)/kWh, including the trading margin of ₹0.07 (~$0.0009)/kWh, for procuring 1,000 MW of solar power from the Solar Energy Corporation of India (SECI). The Tamil Nadu Generation and Distribution Corporation (TANGEDCO) will procure the power under the manufacturing-linked interstate transmission system (ISTS) program.

However, the Commission directed TANGEDCO to negotiate with SECI to reduce the trading margin of ₹0.07 (~$0.0009)/kWh.

The Commission said that since the tariff was competitive, TANGEDCO should consider signing the power sale agreement (PSA) after negotiating the trading margin.

TANGEDCO had filed a petition to procure 1,000 MW of solar power from SECI at 2.61/kWh, including the trading margin of ₹0.07 (~$0.0009)/kWh to meet its renewable purchase obligation (RPO) target.

Background

TANGEDCO, in its submission, stated that approximately 9,400 MW of solar power was required for the year 2021-22 to meet Tamil Nadu’s solar RPO target. Further, based on the state’s total consumption of 106,566 MU for the year 2020-21 and taking into account the RPO target of 10.50%, the approximate solar power requirement was 7,126 MW.

In February this year, TANGEDCO had floated a tender for 500 MW under component A of the Pradhan Mantri Kisan Urja Suraksha Evam Utthan Mahabhiyan (PM KUSUM) program.

Even after considering the ongoing solar projects, there was still a shortfall of about 1,850 MW to meet Tamil Nadu’s solar RPO target.

The Commission had earlier approved procuring power from 500 MW solar projects at ₹2.78 (~$0.038)/kWh. SECI signed the PSA with TANGEDCO on May 5, 2020. The projects come under Tranche-VI of the 1,200 MW ISTS connected program.

For the balance of 1,000 MW of solar capacity, SECI had offered 1,000 MW of solar power by entering into a long-term agreement under the manufacturing-linked ISTS program at ₹2.61 (~$0.036)/kWh.

Commission’s analysis

The Commission observed that the solar power purchase obligation of TANGEDCO was 10.5% of the total consumption for the financial year (FY) 2021-22. By the end of FY 2022, approximately 2,856 MW of solar power would be required to meet the RPO target. There was still a shortage of contracted capacity to the extent of 1,850 MW to meet the solar RPO target.

Out of the 1,500 MW, TANGEDCO had agreed to purchase 500 MW from SECI at ₹2.78 (~$0.038)/kWh. For the balance of 1000 MW, TANGEDCO sought approval for a tariff of ₹2.61 (~$0.036)/kWh.

Earlier, the Commission had issued an order on trading margin under TNERC Licensing Regulation, 2005. The Commission had determined the trading margin as ₹0.04 (~$0.0005)/kWh where the sale price was less than or equal to ₹3 (~$0.041)/kWh.

The Commission directed the petitioner to negotiate with SECI to reduce the trading margin and report the outcome. It said that TANGEDCO could sign the PSA according to the negotiation outcome and furnish a copy to the Commission.

Last year, TNERC had issued a consultative paper for procuring solar power by distribution licensees. The consultative paper had proposed the procurement of solar energy by distribution licensees through the competitive bidding process following the guidelines issued by the Union government.

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